Dalal Street began the week with investors hoping for some stability after four consecutive weekly declines. Instead, the pressure returned, with IT stocks leading the fall and the Sensex slipping nearly 500 points during the session.
Rising prices, tensions around the Strait of Hormuz and growing expectations of a US rate hike kept investors cautious, although buying in select sectors helped the indices recover from their day’s lows.
The BSE ended 382.62 points, or 0.50%, lower at 76,132.81. The index opened at 76,446.05 against Friday’s close of 76,515.43 and moved between a high of 76,477.19 and a low of 75,970.52.
The Nifty 50 declined 118.55 points, or 0.50%, to end at 23,779.15. It opened at 23,883.15, touched an intraday high of 23,890 and slipped to a low of 23,737.90.
The decline came as escalating tensions in the Middle East kept investors worried about energy supplies. Brent crude was trading at $96.71 a barrel, up 0.45%, while WTI crude stood at $91.53, up 0.05%.
The rupee, meanwhile, remained largely flat against the US dollar at 94.485. The currency was caught between sustained intervention by the Reserve Bank of India and pressure from rising oil prices as strikes on vessels sailing through the Strait of Hormuz raised concerns over energy flows.
IT stocks were the biggest drag on the benchmarks. The Nifty IT index fell 2.28%, making it one of the worst-performing sectoral indices.
Infosys was the biggest loser among the major stocks, falling 3.81%. Tech Mahindra declined 1.96%, TCS fell 1.28% and HCL Technologies dropped 0.93%.
The IT sell-off was driven by renewed concerns over US interest rates after stronger-than-expected US jobs data increased expectations of a September rate hike by the Federal Reserve. Higher US rates can affect corporate spending and technology budgets, particularly in the US, which is a key market for Indian IT companies.
The broader IT and telecom segment also remained under pressure, with the Nifty MidSmall IT & Telecom index falling 0.49%.
The second major pressure point was crude oil. Brent remained above $96 a barrel as concerns around the Strait of Hormuz increased following strikes on vessels sailing through the key energy route.
For India, higher crude prices are a major concern because the country depends heavily on imports to meet its oil requirements. A sustained rise in crude can increase the import bill, put pressure on inflation and affect corporate margins.
The impact was reflected in the Nifty Oil & Gas index, which fell 0.61%. Nifty Auto was almost flat, declining 0.04%, while the broader market remained sensitive to the potential impact of higher fuel and input costs.
Vinod Nair, Head of Research, Geojit Investments Limited, said domestic benchmark indices and large-cap stocks remained particularly sensitive to developments around the Strait of Hormuz.
“Domestic main benchmark indices and large-cap stocks remain influenced by developments in the Strait of Hormuz,” Nair said.
Higher crude prices have also added to concerns about inflation, at a time when stronger US economic data has increased expectations of tighter monetary policy.
For global investors, higher US interest rates can make dollar assets more attractive and put pressure on emerging-market equities. This has added to the cautious mood in Indian equities and particularly weighed on interest-rate-sensitive and globally exposed sectors.
Nair said the broader market, however, was showing a different trend, with select mid-caps and small-caps finding buyers on the back of stronger earnings.
“The broader market shows a clear divergence, with small-caps and select mid-caps rally backed by stronger earnings,” he said.
The broader market did not fall as sharply as the headline indices.
Nifty 100 declined 0.48%, Nifty 200 fell 0.48% and Nifty 500 dropped 0.42%. Nifty Midcap 50 declined 0.42%, while Nifty Midcap 100 fell 0.46%.
The Nifty Smallcap 100, however, gained 0.02%, showing relative resilience.
The rise in India VIX was more notable. The volatility index climbed 5.61% to 11.28, indicating increased nervousness among investors.
Nair said value buying has gained traction after the sell-off seen in late 2025 and early 2026, with investors finding valuations more attractive as the earnings outlook improves.
“Value buying has gained traction following the late-2025 and early-2026 sell-off, making valuations attractive as corporate earnings shifts from downgrades to upgrades,” he said.
However, he cautioned that the broader-market rally may be becoming stretched.
The sectoral picture was mixed, but IT and media stocks faced the strongest selling.
Nifty Media declined 2.86%, while Nifty IT fell 2.28%. Nifty Metal dropped 1.24%, Nifty Realty declined 1.70% and Nifty FMCG fell 0.66%.
Nifty Financial Services 25/50 declined 0.51%, Nifty PSU Bank fell 1.06% and Nifty Financial Services Ex-Bank declined 0.57%.
Nifty Private Bank was relatively resilient, falling 0.28%, while Nifty Consumer Durables declined 0.42%. Nifty Chemicals fell 0.46%.
On the other hand, Nifty Pharma gained 0.75%, Nifty Healthcare rose 0.68% and Nifty 500 Healthcare advanced 0.78%. Nifty MidSmall Healthcare gained 0.65%.
Among the Sensex stocks, LT was the top gainer, rising 0.61%. Bharti Airtel gained 0.60%, Maruti rose 0.47%, Power Grid advanced 0.36%, ICICI Bank gained 0.35% and IndiGo rose 0.10%.
Sun Pharma was marginally higher by 0.04%.
On the losing side, Infosys was the biggest laggard, falling 3.81%. Tata Steel declined 1.85%, Tech Mahindra fell 1.96%, Bajaj Finserv dropped 1.57% and UltraTech Cement declined 1.41%.
TCS fell 1.28%, Trent declined 1.16%, Asian Paints fell 1.13%, SBI dropped 1.09% and Adani Ports declined 1.05%.
HCL Technologies fell 0.93%, Reliance Industries declined 0.95%, Eternal dropped 0.82% and Kotak Mahindra Bank fell 0.60%.
While global factors dominated Monday’s trading, Nair pointed out that the Indian market is also seeing a shift in the earnings cycle. Stronger earnings and attractive valuations are supporting buying in parts of the broader market.
But he warned that the broader rally could become vulnerable if the current supportive factors begin to weaken.
“In Q1, higher input costs had little impact on corporate earnings due to stronger consumer demand and tax reduction gains, accommodating product and service price hikes,” Nair said.
“Going forward, there is a growing risk that these supportive factors may fade potentially, weakening earnings expectations and increasing vulnerability to the broad market rally,” he added.
For now, investors are caught between improving domestic earnings prospects and a challenging global backdrop. Developments around the Strait of Hormuz, crude oil prices, the US Federal Reserve’s rate outlook and the performance of IT stocks are likely to remain key drivers for Dalal Street in the near term.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)